Frequently Asked Questions: Oklahoma Energy Jobs Act of 2017
Frequently Asked Questions about Horizontal Drilling in Oklahoma
What is the Oklahoma Energy Jobs Act of 2017?
The Oklahoma Energy Jobs Act of 2017 (SB 867) is a commonsense law that took effect on Aug. 24, 2017 and supports recent innovation in long lateral drilling of horizontal wells. It updates the 2011 Shale Reservoir Development Act by striking the word “shale” in state law to allow long lateral drilling, also called extended horizontal drilling, in all geological formations in Oklahoma. The “shale boom” in the United States that begin in the early-2000s has revolutionized our energy market, quickly leading our nation to energy independence while saving Americans an average of $1,000 a year in energy costs.
Today, innovation in horizontal drilling is also successfully being leveraged in non-shale rock formations. Until the passage of SB 867 by Oklahoma’s 57th Legislature, Oklahoma was the only state to restrict advancements in horizontal drilling to shale rock.
Is innovation in horizontal drilling impacting small vertical producers in Oklahoma?
The era of large-scale development of Oklahoma minerals through small, vertical wells has come to a close as more efficient horizontal recovery methods prove feasible. Last year, more than 80 percent of wells drilled in Oklahoma were horizontal wells according to data from the Oklahoma Corporation Commission (OCC).
Over the past five years, due to the technological revolution, vertical production has declined by 110 million barrels of oil equivalent (mmboe) per year and vertical well count has declined by 8,000 wells. Meanwhile, horizontal production surpassed vertical production as of 2015, and utilizes less than a fourth of the wells and a fraction of the surface impact.
As industry has been shifting its practices, OCC has fine-tuned protections for vertical well owners/operators. The Oklahoma Energy Jobs Act increases protections and mandates that vertical producers be allowed to continue to develop their vertical units without being required to participate in horizontal development.
Furthermore, vertical well operators can petition the Commission to intervene if a horizontal well operator violates regulations involving spacing units, pooling, and between-well spacing. OCC’s Administrative Law Judges regularly allow any party to make a statement on the record, even without an attorney.
How does the drilling of horizontal wells increase revenue opportunities for the state and royalty owners and result in less surface disturbance for surface owners than a standard horizontal well or conventional vertical well?
Horizontal wells, particularly extended horizontal wells that can run 2 to 3 miles laterally under ground, allow more efficient production of the mineral estate and reduce waste to generate more profit for royalty owners and more revenue for the state. In addition, utilizing horizontal on a multi-well pad means that 2, 10, 20 or more wells can be drilled from a single, compact piece of land—reducing land use by more than 50 percent when compared to a single well pad.
Why did the 2011 Shale Reservoir Development Act only allow extended horizontal wells in shale formations and not all geologic formations in Oklahoma?
At the time of the Shale Reservoir Development Act, horizontal drilling was known for being a successful drilling method in shale formations. Innovation in horizontal drilling has rapidly advanced over the past seven years and has allowed industry to explore and produce oil and natural gas cost-effectively in geologic formations other than shale.
Meanwhile state law remained stagnant. The 2011 law made way for industry to double oil production in Oklahoma and increase natural gas production by 50 percent. The Oklahoma Energy Jobs Act, signed into law this year, updated Oklahoma’s law and will accelerate additional economic growth by allowing extended horizontal wells in non-shale formations.
How did Oklahoma’s limitation of long lateral drilling to only shale formations compare to other states?
Several states allow extended horizontal drilling without restricting it to a geologic formation. Oklahoma’s largest oil and gas operators also have an active presence in Texas, Colorado, North Dakota, Utah, and New Mexico, where they are using long lateral drilling to develop oil and natural gas in non-shale formations. There are many other states where long lateral drilling is practiced as well. As of Aug. 28, 2017, with the Oklahoma Energy Jobs Act took affect, Oklahoma now has a level playing field with long lateral drilling compared to all other top energy-producing states.
Does horizontal drilling induce seismic activity?
The Oklahoma Geological Survey (OGS) and the Oklahoma Corporation Commission (OCC) have said their focus on addressing seismic activity in Oklahoma is centered on the use of saltwater disposal wells and NOT on hydraulic fracturing or horizontal drilling activity. The state has taken steps, in collaboration with the scientific community and with cooperation from industry, to permanently cap volumes in disposal wells. Since June 2015, the frequency of seismic events has rapidly declined by more than two-thirds according to OGS data.
In December 2016, the OCC announced it was taking a “proactive” step to put guidelines in place for anomalous seismic activity that has occurred near completion operations. In the announcement, OGS Director Dr. Jeremy Boak said, “Unlike the strong earthquake activity in [Areas of Interest] linked to disposal activity, response to seismic activity that might be related to hydraulic fracturing can be more precisely defined and rapidly implemented.” Dr. Boak has called these quakes “small and manageable,” and said there have been few – if any – confirmed above a magnitude 3.0.
OKOGA member companies are actively monitoring their operations, many with state-of-the-art seismic arrays, and adjusting in real time using methods that have proven effective in Ohio and British Columbia. For more information, please visit http://okoga.com/seismicity/